Against that backdrop comes this upbeat view on stock picking from Nir Kaissar, founder and portfolio manager at Unison Advisors — which is largely based on elevated valuations.

The U.S. stock market “looks very expensive,” and that means the S&P 500’s
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returns over the next decade “are not going to be great,” said Kaissar, while co-starring in WisdomTree’s latest “Behind The Markets” podcast.

And so he has bet that hedge funds will outperform the S&P over the next 10 years, with Ritholtz Wealth Management’s Ben Carlson taking the other side of the wager and discussing it in the podcast.

It’s basically a redo of Warren Buffett’s famous $1 million bet that an index fund would beat a selection of hedge funds over a decade. The Berkshire
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boss already has been doing a victory lap, as he enjoys a big lead with less than a year to go.

Except only a beer is at stake this time — and passive-funds fan Carlson is conceding that the bet won’t be a blowout like Buffett’s.

“I think it’ll actually be a much closer race than the one that Buffett’s in now, because I agree with you — we’re at above-average valuations,” Carlson, known for his A Wealth of Common Sense blog, told Kaissar.

“I don’t think that means we have to see a market crash — like a lot of people tend to believe — but I think it’s safe after a huge bull market to alter your expectations and assume lower-than-average returns follow above-average returns,” he said.

And Carlson has thrown another bone to the 2-and-20 set (2% annual fixed fee and 20% of profits): “Something that people forget is that hedge funds are really a ‘cash-plus asset structure,’” so a rising-interest-rate environment could actually help them, he said.

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